Kutaisi Hualing Free Industrial Zone

Doing business in Georgian Free Industrial Zones (FIZ) is considerably more efficient due to the lower tax burden in such zones. Thus, it is no surprise that FIZ attract investors. It is enticing indeed to have a business in a country with a stable economy, adequate legislation, and loyal government support. So, what exactly attracts investors to the most successful of all Georgian Free Industrial Zones – Hualing Kutaisi?

Introducing Hualing Free Industrial Zone

The Hualing FIZ project started on June 7, 2012 when the Georgian government and the Hualing Group (China) signed a memorandum on establishing a free industrial zone in the city of Kutaisi. For a US$ 40 million investment, the Hualing Group was granted 36 hectares of land for use.

The agreement between the Georgian government and the Hualing Group on establishing a tax haven was signed on May 20, 2015 in Hotels&Preference Hualing Tbilisi, a hotel that belongs to the Hualing Group. This agreement granted the hualing Group the status of the FIZ administrator. According to the agreement, the precise area of the Zone is 359 251 square meters (around 429 660 square yards) and the contract duration is thirty years.

Hualing Group is one of the largest investors in Georgia. The Chinese company built the Olympic village near Tbilisi, it owns Hualing hotels in Kutaisi and Hotels&Preference Hualing in Tbilisi, a furniture factory 20 000 square meters (23 920 square yards) in size, and the Basisbank. In addition to that, the Hulaing Group has invested another US$ 150 million in construction of a 420-hectare (1.62 square mile) new district in Tbilisi called Hualing Tbilisi Sea New City.

The Hualing Free Industrial Zone is located in the city of Kutaisi on the premises of a former motorcar factory close both to a highway and to a railroad. The distance to the closest airport in 19 kilometers (less than 12 miles) and to the seaport in Poti – 95 kilometers (less than 60 miles).

Over the two and a half years the Hualing FIZ has been in operation, it has managed to attract to Georgia US$ 70 million in investment money. As of June 2018, 130 business companies are registered in this Zone. The following products are manufactured here: ferroalloys, solar panels, matrasses, paper, construction materials, furniture, and textile. Besides, wood and stone are processed in this Zone. It is worth noting that not only foreign companies are present here: around 25% of the FIZ companies belong to Georgian citizens. Many companies located in the Zone use it as a logistic center that allows optimizing the import – warehouse – export commerce. A large portion of the Hualing FIZ businesses is engaged in processing wood and manufacturing consumer goods.

Advantages of Kutaisi Hualing Free Industrial Zone in Georgia

The most attractive factor for investors in this FIZ is almost total absence of taxes here. The business companies registered here do not have to pay the VAT (18%), nor the corporate income tax (15%), nor the dividend tax (5%), nor the property tax (1%). They also do not have to keep the books, nor undergo financial audit. The additional benefits of the Hualing Free Industrial Zone are as follows:

• A good location close to Kopintari airport and an international highway that connects Caucasian countries to Asia, Turkey, and the Black Sea; it is also relatively close to a large seaport in the city of Poti;
• Companies registered in the Hualing FIZ can export their produce duty free to EU and UIS countries, Switzerland, Norway, Luxemburg, Iceland, China, Turkey, and Ukraine. Besides, Georgia has made lucrative trade agreements with the USA, Canada, and Japan;
• Both foreigners and Georgian citizens can be constitutors of the company registered in this Zone;
• There are no limitations as to the amount of registered capital;
• Company registration is fast and simple here;
• The customs inspection takes no more than one hour, and the customs office is open every day around the clock;
• Georgia has agreements for avoidance of double taxation with 55 countries;
• Payments can be made in any national currency in this Zone;
• The utility charges are low as there is no VAT here, and electricity price is the lowest in the region;
• There are no import and export quotas or limitations;
• Connecting to the electric lighting wires is free of charge;
• It is possible to make a 25-year rent agreement open for prolongation for land allotments, production facilities, or offices;
• There is no minimum time requirement for the rent agreements;
• Companies registered in the Hualing FIZ obtain a legal address;
• The security level is very high here: the Zone is fenced by a concrete wall and it is under security surveillance 24/7;
• There is housing available in close proximity to the Zone: accommodations can be rented for any period of time.

In the Hualing FIZ consultation services, security services, legal and financial business support, and certificates of origin can also be obtained. Apart from that, loading-unloading facilities are available.

The Hualing Free Industrial Zone infrastructure

All the necessary business infrastructure is there in this tax haven. There are warehouses and production facilities from 100 to 16 000 square meters (120 to 19 000 sq. yards) with access ramps and cranes. There are also office buildings equipped with desks.

Apart from that, the Hualing FIZ residents can make use of the following:

• Dockage facilities;
• Direct access to the railroad and loading terminals;
• Truck parking;

All the interiors are well maintained, and all the utilities (such as water supply, drainage, and electricity) are available.

Types of licenses in the Hualing Free Industrial Zone

In order to do business in the Zone all companies shall acquire licenses from the Zone administration. These licenses have to be renewed every year. There are licenses of the following types:

• Production license – issued to the companies engaged in production and sale of their produce;
• General trade license – issued to the companies that export, distribute, and store different goods. Plainly speaking, this license is meant for those companies not engaged in production activities;
• Special trade license – issued to the companies that deal in the sales of one particular class of products (such as furniture, household appliances, clothing, etc.);
• Consultation license – issued to the companies that provide consultation services;
• Service license – issued to the companies that provide other types of service. However, it must be said that according to the Georgian legislation, companies that are registered in a FIZ are not allowed to provide services to residents of Georgia;
• Commercial license – issued to the companies that specialize in other areas of business not listed above;
• Contract license – issued to the companies that provide construction or repair services on the territory of the Hualing FIZ.

The cost of services in the Hualing Free Industrial Zone

License and rent prices in this Zone are lower than in any other FIZ which makes it even more attractive. These are as follows:

• Price of a license for one year: general trade – US$ 7000, contract – US$ 6000, special trade – US$ 4000, service – US$ 4000, and consultation – US$ 3000;
• Price of a “Made in Georgia” license — US$ 2 000;
• Rent price for 1 square meter (nearly 1.12 sq. yards): land lot – US$ 10, warehouse — US$ 55, office space — US$ 70 a month;
• Construction permit price – 1% to 2% of the total cost of the construction project.

The procedure of company registration in the Hualing Free Industrial Zone

Both a legal entity and a private entrepreneur can do business in the Hualing FIZ. There are no special requirements to the investors here.

The stages of business company registration in the tax haven are as follows:

1. Fill out a simple application form providing only the very basic information about the future company: its name, names of constitutors, their addresses and contacts, and the type of the intended business activities.
2. Have the company registered by the state authorities.
3. Sign an agreement and pay for the license.
4. Open a bank account.

 Opening a corporate bank account on a personal visit to the Bank of Georgia

Possible problems in Georgian Free Industrial Zones

Apart from the advantages, the Hualing FIZ has some disadvantages. However, these are not dissimilar to the disadvantages that other such zones have. The law that regulates the activities of Free Industrial Zones in Georgia was passed back in 2007 and no changes to it have been made ever since. But some changes are required indeed, and many business people have appealed to the Georgian government with the following initiatives:

• Abolish the 4% tax on import of goods from, and export of goods to Georgia;
• Allow residential accommodations on the FIZ territory;
• Enhance protection of investors from probable impacts that might occur due to possible future changes in the local legislation. The matter is that the buildings erected by business companies on the territory of a FIZ are not these companies’ property. They are owned by the FIZ administration and this is not something FIZ residents appreciate. They feel they cannot be hundred percent sure that they will not lose their assets in case the political regime in the country changes, or a new Zone administration comes.

Nevertheless, the large number of resident companies in the Hualing Free Industrial Zone makes it the most successful such zone in Georgia. This outstanding result has been achieved due to a combination of factors. The major of them are as follows: good infrastructure, good location, and favorable price policies adopted by the Zone administration. If you are interested in having a business company registered in the Hualing FIZ, please contact us via e-mail: [email protected]. We will be happy to answer all your questions and assist you in registering a business in Georgia.